Saturday, August 18, 2007

Economic Control

It is an article of faith in the so-called “West” that the invisible hand of the free market in capitalist economies will properly allocate resources and effort to maximize the wellbeing of their participants. The mechanism is fundamentally the same as evolution, where natural selection favors those genes that offer the best chance of survival. (For this reason, it amazes me that so many people who believe in capitalism do not accept the reality of biological evolution.) Clearly faith in the market is unfounded: By its nature, the market will not maximize the wellbeing of all of its participants, only some of them.

Confronted by this disconnect between expectations and outcomes, societies with capitalist economies have granted a controlling role to their governments, effectively restricting the “freedom” of the market so that no individual or group gains too much power. If a government controls too little, economically powerful groups use the government to benefit them and the society becomes fascist. If the government controls too much, resource distribution becomes too inefficient for people to thrive and it becomes communist. In fact, one of the most common ways of looking at political turmoil in such societies is in terms of how its citizens define role of government in controlling the economy.

People who are stressed by variability in their environment and care most about people like them prefer to maximize personal power, and will tend to favor a system that offers the best chance for that. For them, this is far better than evenly distributing economic power to everyone. With hard work and manipulating the right people, they expect to become among the favored few in an evolution-based economy.

On the other hand, people who are comfortable with variability and distrust concentration of power will favor the alternative. The entire population is their favored group, with every individual, regardless of characteristics, as valuable as any other. They see both the economy and government as tools for enabling everyone, not just a select few.

No comments: